Test your basic knowledge |

AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Ed = 8 - infinite change in demand to price change






2. Two goods are consumer substitutes if they provide essentially the same utility to consumers






3. Ed > 1 - meaning consumers are price sensitive






4. Exists if a producer can produce a good at lower opportunity cost than all other producers






5. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






6. The additional cost incurred from the consumption of the next unit of a good or a service






7. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






8. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






9. The difference between total revenue and total explicit and implicit costs






10. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






11. Entry of new firms shifts the cost curves for all firms upward






12. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






13. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






14. Ed = 1






15. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






16. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






17. When firms focus their resources on production of goods for which they have comparative advantage






18. Demand for a resource like labor is derived from the demand for the goods produced by the resource






19. TR = P * Qd






20. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






21. 0 < Ei < 1






22. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






23. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






24. Entry (or exit) of firms does not shift the cost curves of firms in the industry






25. The imbalance between limited productive resources and unlimited human wants






26. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






27. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






28. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






29. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






30. Models where firms are competitive rivals seeking to gain at the expense of their rivals






31. Ed = 0 - no response to price change






32. All firms maximize profit by producing where MR = MC






33. The difference between total revenue and total explicit costs






34. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






35. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






36. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






37. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






38. Exists if a producer can produce more of a good than all other producers






39. AVC = TVC/Q






40. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






41. The total quantity - or total output of a good produced at each quantity of labor employed






42. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






43. Total product divided by labor employed. APL = TPL/L






44. The mechanism for combining production resources - with existing technology - into finished goods and services






45. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






46. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






47. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






48. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






49. The output where ATC is minimized and economic profit is zero






50. The most desirable alternative given up as the result of a decision